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lota Company manufactures a component used in its main product. During the current year, the costs to produce 20,000 units of this component were $225,000,
lota Company manufactures a component used in its main product. During the current year, the costs to produce 20,000 units of this component were $225,000, consisting of: Fixed Direct Materials Direct Labor Manufacturing Overhead Variable (per unit) $ 4.00 $2.00 $ 1.50 $7.50 $75,000 Another company has offered to manufacture the 20,000 components for lota for $12.00 each. If lota buys the components, all variable costs and 70% of the fixed costs are avoidable, and the company can rent out the space currently used to manufacture the components for $40,000 per year. What is the financial advantage (disadvantage) to lota of making the parts? O ($ 2,500) $15,000 $27,500 O O ($25,000)
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